Credit Implications of Rogers Communications Inc. March 19, 2021 -Shaw Communications Inc

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Aniki Saha-Yannopoulos Canadian Telecom & Media Madhav Hari Credit Implications Of Rogers Communications Inc. March 19, 2021 -Shaw Communications Inc. Merger

Click here for webcast replay Key Takeaways | Leveraged Purchase Credit Negative For Rogers

– Our ‘BBB+’ issuer credit rating (ICR) on Rogers placed on CreditWatch Negative; Shaw Communications Inc. ‘BBB-’ ICR unchanged

– About C$26 billion total transaction value, including fees--11x pre-synergy EBITDA; closing first-half 2022

– Assuming debt financed--weakens Rogers’ leverage to more than 5x from the 3x area at year-end 2020

– Positive impact on Rogers’ business risk profile--scale, diversity, operating efficiency, 5G readiness

– Leverage lift from net synergies could be material, but likely back-end loaded

– Integration and transition risks could be meaningful--including competitive response from rivals

– Free cash flow (FCF) for debt reduction likely tempered in first couple of years; debt repayment discipline will be key

– Regulatory approval risk a potential headwind--mostly around wireless assets (Freedom Mobile)

– Implications for future regulatory actions to promote sustainable competition is less clear

2 Business Risk Profile Implication | Moderately Credit Positive

– C$20 billion pro forma revenue (+40%) Improved Scale – About 60% of Canadian households (9.1 million homes passed) – About 32% residential RGUs; About 38% Wireless subscriber share – Wireless/Wireline: 50%-42% Balanced Revenue Mix – Wireless & High-Speed Internet: estimated 65%-68% – Revenue synergies from bundling and cross sell + Business Telecom – Cost synergies--Corporate, G&A, rate cards, real estate Operating Efficiency – Capex synergies from procurement & capital efficiency; long-term certainty – Potential benefit from rationale spectrum bidding – Integration and transition risks significant; Proposed synergies are ambitious

– Addresses Western Canada deep 5G backhaul 5G Wireless Readiness – Adds significant wireless spectrum – Improves timing of 5G go to market for IoT on a nationwide basis – Less clear: Regulatory response to determine implications Industry Risk – Positive driver: Competition moderation – Negative driver: Adverse regulatory response

3 Financial Risk Profile Implication | Decidedly Credit Negative

Transaction Capitalization (C$ billion) – Assuming largely debt financed--RCI’s adjusted debt RCI Equity (to Shaw Family) $1.4 increases almost 2x Acquisition Debt * $18.6 – Initial leverage of >5x versus 3x area at Dec. 31, 2020 Shaw Debt (including preferred) $6.0 – Potentially meaningful FCF available for debt Transaction Value $26.0 repayment could be back-end loaded owing to * assumes purchase all debt financed spectrum and integration investments – Integration and transition risks could delay cash S&P Global Ratings Adjusted Pro forma Leverage flow growth and deleveraging Debt (2020; C$ billion) $43.0 – Potential regulatory remedies need to be considered EBITDA*, pre synergy (C$ billion) $8.5 – Asset sales could aid deleveraging Debt-to-EBITDA (x) 5.1 – Ultimately, deleveraging discipline will be key * 2021 S&P Global Ratings est. EBITDA

4 Analytical Contacts | S&P Global Ratings (Canada Corporates)

Ron Charbon TMT, Retail, Consumer Products MD, Analytical Manager Aniki Saha-Yannopoulos, CFA, PhD (416) 507-2516 Director, Lead Analyst [email protected] (416) 507-2579 [email protected] Madhav Hari, CFA Senior Director, Sector Lead Silverius Miralles (416) 507-2522 Associate Director [email protected] (416) 507-2505 [email protected]

Archana Rao Associate (416) 507-2568 [email protected]

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